What I have done thus far is this:
Right-click one component instance from anywhere in the model hierarchy, then select "Save all Instances"
The plugin saves the component to disc in the same folder as the original model as a .skp file. The plugin goes through the model and writes the positions of each of the instances in the model to a text file with the same name as the component i the same folder.
Now you have the option to use the "Import Instances" in the Extensions menu. You can import to the same model, or to a new model. All instances are imported to the same location as in the original file, but they are all at the Model context. You can then manually save imported components file as a version 8 file.
I am still working out how to best create the version 8 file containing only the selected components from the original model. I hope this helps for now. I plan on continuing work as time permits.